HMO tax proposed

March 13, 2019

A new tax on HMO plans is currently under consideration in the Missouri Senate Appropriations and Missouri House Budget committees.

In testimony yesterday before the Missouri House Budget Committee, chaired by Rep. Cody Smith, Ray McCarty, President/CEO of Associated Industries of Missouri (AIM), let the Committee know AIM opposes such a tax. McCarty also sent an email last week to many members of the Senate Appropriations Committee, chaired by Sen. Dan Hegeman in opposition to the concept of an HMO tax.

The tax is proposed as an amendment to bills that would otherwise extend current federal reimbursement allowance taxes. Federal reimbursement allowances (FRA) are taxes paid by hospitals, ground ambulance services and other entities, that are pooled and matched by federal funds to help fund Medicaid. AIM supports such taxes as the entities paying the taxes receive benefit from the taxes.

The proposed HMO tax is different. It would be a tax on HMO premiums, either as an amount per insured or percentage of premiums. The current discussion is around a tax of $1.80 per covered person per month, $21.60 per covered person per year. For an employer with 200 employees and dependents covered under their HMO plan, the tax would be $4,320 per year! The tax would be paid by employers who would receive no benefit from the tax. The tax would be used to generate additional Medicaid money.

“While AIM supports the FRA process because the entities that pay those taxes benefit from additional federal money for Medicaid, we strongly oppose any tax on HMO’s or any other type of health plan,” McCarty told the House Budget Committee. “We polled our membership and found this tax would impact employers from 5 employees to 10,000 employees. We are also concerned that if such a tax were enacted, a similar tax may be enacted in the future that would tax other types of health plans, expanding the scope of the tax even further.”

A corresponding reduction in another type of tax has also been considered; however, McCarty points out that the tax increases and decreases would not impact the same group of people. It would be difficult to craft an income tax cut, for example, that would provide the same benefit as a business may pay in this new HMO tax.

Aside from surveying members on the issue, AIM’s Executive Committee considered and voted to oppose the HMO tax. AIM has a policy against tax measures that increase the cost of doing business in Missouri without corresponding benefit.